German Car Makers VW, BMW, Daimler Victimized By China Fears

German car shares were leading European stock markets down as worries about China continued to spook investors.

The Stoxx Europe 600 index was down nearly 3.5 per cent on Thursday, bringing the total fall so far this year to 6.5 per cent.

But auto stocks, heavily dependent on China for a big part of their profits, led the markets down. By late morning Volkswagen, which has other, well rehearsed problems in America, was the biggest auto loser, off close to 5.5 per cent, followed by BMW down nearly five per cent and Daimler about 4.5 per cent lower. Since the start of the year VW’s stock price has lost more than 11 per cent, BMW close to 10 per cent, and Daimler around 15 per cent.

Investment researcher Evercore ISI said the devaluation of the Chinese currency was the biggest threat to the global economy and the reason for panic selling of shares.

HUAIBEI, CHINA - JANUARY 07: (CHINA OUT) An investor observes stock market on January 7, 2016 in Huaibei, Anhui Province of China. Chinese shares slumped to a halt in half an hour on Thursday which was the second halt in the four trading days of 2016. The Shanghai Composite Index fell 245.96 points, or 7.32 percent, to halt at 3,115.89 points. (Photo by ChinaFotoPress/Getty Images)

“German (car makers) are suffering in particular. In 2015, we estimate (they) exported about 511,000 vehicles from Germany and the U.S. to China,” Evercore ISI said in its daily report.

Evercore ISI estimated the combined foreign exchange exposure of Daimler, BMW and Volkswagen to China at 27.3 billion euros ($29.6 billion), which is hedged for the next two to three years.

“Nevertheless, assuming a 20 per cent devaluation from last year’s average (China renminbi versus euro) would equate to a lost profit pool of about 5.5 billion euros ($6 billion) for the three German manufacturers or 17 per cent of 2015 estimated operating profit, assuming no hedging,” Evercore ISI said.